108: Why It’s Important to Know Your Numbers

Wealth by Design

Do you know your numbers?

We’re not talking about your numbers like how much you have in your checking account, or age and weight (which we shouldn’t be asking about anyway!). By “numbers,” we mean the three numbers that can help you ride out this COVID-19 crisis… or any big unexpected life change that comes your way.

We’re talking about:

1. How much money you really need to make
2. Your emergency fund number
3. Your BULB threshold

In our latest Wealth by Design episode, we talk about calculating those three numbers and how you can actually reach them.

WHAT YOU’LL LEARN

• [00:31] Why you need to “know your numbers”
• [03:45] The questions we’re all asking ourselves right now
• [06:09] How you know you’re financially secure
• [06:58] Getting your finances (and mindset) in order
• [10:04] What is your income need?
• [10:53] How to calculate your true income need number
• [11:35] Calculating your emergency fund number and BULB number
• [12:51] A quick note about reaching BULB status
• [14:35] How to get to those three numbers
• [17:07] Some resources and exciting news

Calculating your income need and emergency fund

What’s your true income need? As in… how much income do you need? To find that first number, look at an average month from the past six months. Look at your expenses; see what you spent on your mortgage or rent, groceries, utilities, and so on.

Use your favorite budgeting app or tool (or good ol’ paper and pen!) to calculate what you spent on your needs. Not your wants, but your needs. Everyone is different and we’re not about judging other people’s lifestyles, but see what extra expenses you can actually live without, like ordering takeout or shopping online.

Now that you have your income need number, you can figure out how much to set aside in your emergency fund.

Example: Let’s say your income need was $4,000. Your emergency fund should be, at minimum, 3 to 6 times that number. So, you should have $12,000 to $24,000 set aside in an easily accessible account.

Working toward BULB status

We won’t go too much into detail about BULB here, but as a quick refresher, BULB stands for “backup life bank.” It’s a number that, once achieved, you can switch to a work-optional lifestyle if you want. That magical number is about 25 times your minimum income requirement.

And that minimum income requirement is everything you need to live the way you want, so you should include stuff like Netflix and your dream car and taking care of ten adopted pets. Your income need that we discussed in the previous section covers the basics and essentials. This number includes your needs and wants.

Example: So, let’s say you need $60,000 a year to live life the way you want. Your BULB number would about 25 times that, or about $1.5 million. Yes, it sounds like a lot, but there are ways you can make your money work for you to reach that number. (Hint: give Episode 63 a listen.)

Why these numbers matter right now

Look, we know things are scary right now. And we feel for those of you who may have seen business slow down, or missed out on opportunities to build up your savings before the coronavirus shut everything down.

As Danielle pointed out, about 26 million Americans have applied for unemployment benefits at the time of this recording — including contractors and gig workers. That number has probably increased even more while you’re reading this.

However, knowing your numbers is important even when there isn’t a global pandemic running rampant. Life can throw you a curveball at any time, as we’ve seen with recent events. So you should always be prepared.

In times of international or personal crises, you need to know your numbers in order to feel financially secure. You should know how much income you need to keep you and your family going. You also need to know how much to have in your emergency fund so you can continue to survive.

In short, you need to Know Your Numbers, which is why we created a FREE challenge that helps you do just that. We’ll deliver these exercises right to your email so you know your numbers without a ton of overwhelming math, and you’ll know exactly what you can do today to feel more comfortable with the money you’ve got.

If that floats your boat, sign up for the Know Your Numbers Challenge now!

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.

RESOURCES & PEOPLE MENTIONED

• Sign up for our free Know Your Numbers challenge!
• Unemployment updates from MarketWatch
• Episode 63: Your BULB Threshold
• Episode 4: The Bucket Strategy
• The BULB Calculator
• Check out our DIY Financial Planning Course
• The Toujours Planning Blueprint to Wealth + Security
• Our YouTube Channel
• Schedule a free call with us — Are we a good fit for your financial planning needs?

CONNECT WITH DANIELLE AND DUSTIN

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